DRKOOP.COM: Insider Selling Raises Eyebrows
Insider selling by drkoop.com Chair C. Everett Koop, Vice Chair John Zaccaro and board member and physician Nancy Snyderman have raised concerns among analysts and investors, the Austin American-Statesman reports. In February, Koop, Zacarro and Snyderman sold more than 1.1 million shares in the company, totaling more than $10 million -- a legal move -- but one that "can send a message to the market that company leaders are losing faith." While key insiders generally sell some of their holdings after a company goes public, Steve Stelmach, a First Call Corp. analyst, said, "You would expect insiders to have more confidence than selling at such low prices. ... [W]hen a company's stock has been beat up as much as drkoop, it's not a positive vote of confidence." The insider selling is just one more ailment in the company's financial health. During the insider selling, the stock fell from $11.81 a share to $7.69, tumbling even further when Barron's magazine reported that the company had three months worth of cash available and when PricewaterhouseCoopers auditors "cast doubt on drkoop.com's ability to stay afloat."
The insider selling has some observers questioning what Koop, Zacarro and Snyderman knew before they sold their shares. While auditors had finished their field work on the company by Feb. 15, they did not issue a "going concern opinion" -- "a rarely used tool that constitutes grave news for a company" -- until March 27. In the meantime, Koop, Zacarro and Snyderman had sold their stock off between Feb. 18 and Feb. 29. University of Texas accounting professor Urton Anderson said that auditors generally do not take six weeks to notify a company that a going concern opinion is imminent. He said, "I think the SEC would look at that very closely. Trading during that period if you were in upper level management would be risky." But drkoop.com spokespeople said that Koop, Zacarro and Snyderman only had eight business days to make the trades before they would be restricted by SEC rules until late April (Park, 4/11).